"The real estate cycle typically lags behind the economic cycle by a few months, so property market conditions are unlikely to exhibit material improvement until next year," concludes the report, "even if, as widely projected, the US economic recovery does begin during Q3 or Q4."

While the rate of decline has moderated, no "green shoots" have yet sprouted in the distribution property markets. At midyear 2009, the overall vacancy rate stood at 10%, which is 130 basis points above what it was at the start of the year and 325 bps above the cyclical trough in the third quarter of 2007, according to the report. Asking rents declined 3.9% during in the second quarter, the fifth consecutive quarterly decline, and are now 9.3% below the cyclical peak reached in the first quarter of 2008.

"Concessions have become commonplace in many markets," states the report. "Based on anecdotal information, net effective market rents nationwide appear to have fallen somewhere between 15% to 20% on average during the past year."

New bulk distribution starts in the top 31 markets in the first half of 209 totaled just five million square feet, a small fraction of the 92 million square feet in 2008 and 161 million square feet in 2007. "Credit market conditions have eased a bit in recent months, but lenders remain extremely tight-fisted, especially to commercial property developers," states the report. "New starts have slowed to a trickle and consist mostly of pre-leased build-to-suit projects. The only new speculative development projects being built are those with iron-clad pre-commitments from lenders."

Assuming the recent slowdown in construction persists, new starts will total just five million square feet in 2009. ProLogis estimates that to be far below the need to replace "tens of millions of square feet of functionally obsolete space" that are withdrawn from the market every year.

"Although the current US recession has turned out to be the worst of the postwar era, it is by no means certain that the current downturn in the distribution property market will also turn out to be the most severe," concludes the report.